Header

UZH-Logo

Maintenance Infos

Hunting unicorns? Experimental evidence on predatory pricing policies


Edlin, Aaron; Roux, Catherine; Schmutzler, Armin; Thöni, Christian (2017). Hunting unicorns? Experimental evidence on predatory pricing policies. Working paper series / Department of Economics 258, University of Zurich.

Abstract

We study the anticompetitive effects of predatory pricing and the efficacy of three policy responses. In a series of experiments where an incumbent and a potential entrant interact, we compare prices, market structures and welfare. Under a laissez-faire regime, the threat of post-entry price cuts discourages entry, and allows incumbents to charge monopoly prices. Current U.S. policy (Brooke Group) does not help. A policy suggested by Baumol (1979) lowers post-exit prices, while Edlin’s (2002) proposal reduces pre-entry prices and encourages entry. While both policies show outcomes after entry that are less competitive than under Laissez-Faire, they nevertheless increase consumer welfare.

Abstract

We study the anticompetitive effects of predatory pricing and the efficacy of three policy responses. In a series of experiments where an incumbent and a potential entrant interact, we compare prices, market structures and welfare. Under a laissez-faire regime, the threat of post-entry price cuts discourages entry, and allows incumbents to charge monopoly prices. Current U.S. policy (Brooke Group) does not help. A policy suggested by Baumol (1979) lowers post-exit prices, while Edlin’s (2002) proposal reduces pre-entry prices and encourages entry. While both policies show outcomes after entry that are less competitive than under Laissez-Faire, they nevertheless increase consumer welfare.

Statistics

Downloads

14 downloads since deposited on 03 Jul 2017
14 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:D21, K21, L12, L13, C91
Uncontrolled Keywords:Predatory pricing, entry deterrence, firm strategy, antitrust law, experiment
Language:English
Date:June 2017
Deposited On:03 Jul 2017 15:06
Last Modified:09 Dec 2017 01:30
Series Name:Working paper series / Department of Economics
Number of Pages:30
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp258.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

Download

Download PDF  'Hunting unicorns? Experimental evidence on predatory pricing policies'.
Preview
Content: Published Version
Filetype: PDF
Size: 1MB